Leonard Muzyn's TVARS Blog

IRS contribution limits The overall 401(k) contribution limit for calendar year 2014 will increase from $51,000 to $52,000. This overall limit includes employees’ pre-tax, after-tax or Roth contributions to the 401(k) Plan; TVA’s matching contributions to the 401(k) Plan; and employees’ after-tax contributions to the Fixed or Variable funds. The pre-tax contribution limit to the 401(k) plan will remain at $17,500, while the pre-tax catch-up limit for employees who are age 50 or older in 2014 will remain at $5,500. Note: Catch-up contributions do not count toward the overall contribution limit of $52,000. In addition, the interest rates for the Cash Balance Benefit Structure and the Fixed Fund remain at 6 percent for 2014. Retirement Estimates with New Actuarial Factors Now Available As announced earlier in TVA Today, the TVARS board in November adopted new actuarial assumptions. The new assumptions more accurately reflect the life expectancy of TVA employees and retirees. N...

The TVARS board approved a 1.53 percent cost-of-living adjustment (COLA) for eligible retirees and beneficiaries for calendar year 2014. Retirees will see the increase in checks beginning Jan. 31, 2014. The COLA is calculated by comparing the percentage change in the average CPI-U for Nov - Oct compared to the previous Nov - Oct.

As part of TVA CEO William D. Johnson’s $5,904,531 compensation package for nine months work in fiscal year 2013, he received $2,051,329 of value in his Supplemental Executive Retirement Plan (SERP).  The SERP is made available to a limited number of TVA executives and is not part of TVARS.  The SERP received $6,000,000 of ratepayer money.  Mr. Johnson received $12,066 of value in his TVARS pension.  TVARS received nothing.  (See pages 135, 168 and 172 in TVA’s fiscal year 2013 10-K financial statement .) 

I made the following statement during the September 12, 2013 TVARS board meeting. It will be included in both the transcript and in the official minutes: The minutes of the July 19, 2013 board meeting that we are voting to approve indicate that four TVARS board members voted to recommend that TVA contribute $285 million to its employees' pension plan next fiscal year. Two TVARS board members voted against it because they thought it was too much to ask TVA to pay. $285 million is clearly not enough, but I was the only one who voted against it for that reason. Our members can see from TVA’s financial statements that last fiscal year TVA contributed nothing to its employees' pension plan while it contributed $8 million to its executives' supplemental pension plan. Our members can see that TVA's reported pension expense was $530 million . Our members can see from the TVARS annual report that TVARS paid approximately $600 million in benefits to approximately 23,1...

Posted in CEO Employee Forum , Financial Services on August 7 2013 Question: I’ve heard TVA plans to eliminate the original retirement plan and force all employees into the cash balance plan. If this happens, would employees currently in the original plan have the opportunity to retire in the plan within a certain timeframe, or would they automatically be transferred to the cash balance plan with no warning? Answer: There are no plans to eliminate the original retirement plan or force TVA employees under the original plan into the cash balance plan. The TVA Retirement System will continue to have two benefit structures within the Plan: the Original Benefit Structure and the Cash Balance Benefit Structure. The System also administers a defined contribution plan with matching contributions, the TVA Savings and Deferral Retirement Plan (401(k) Plan). There are currently no plans to “do away with” or change any of the options previously mentioned.

The board of directors of the TVA Retirement System held its regular quarterly meeting Friday, June 28. The TVARS board approved changes to the TVARS rules and 401(k) Plan provisions to allow credit on up to 4% of regular salary or wages for certain TVA lump-sum payments made to employees in FY 2013 in lieu of base-wage or salary increases. The credit is used to calculate pension benefits under the rules and TVA matching contributions under the 401(k) Plan.

07/03/13 Plaintiffs’ MOTION (See entire document here .) The Plaintiffs Charles T. Evans, David McBride, Ronald E. Farley, Larry J. Simpson, Robert B. Bonds, and Steve Hinch move the Court to administratively reopen this civil action and conduct a case management conference. 1 The relief requested by this motion being within the sound discretion of the Court, a supporting memorandum of law is not filed. However, the Court may wish to note the civil action was administratively closed by Order entered 5/22/12 (Docket Entry no. 108) so the parties could engage in mediation with a view to a possible informal resolution of all issues. The Order granted a joint motion (Docket Entry no. 107) that accorded any party the right to petition for a reopening of the action if the mediation proved to be unsuccessful. The parties have engaged in mediation, spent hundreds of hours attempting to accomplish a mutually agreeable resolution, but are unable to resolve all issues. Accordingly, Plain...

Per TVA’s Office of Inspector General, TVA’s qualified employee pension plan administered by TVARS was only 59 percent funded at the end of fiscal year 2012.  TVA needed to contribute an additional $4.9 Billion to make the pension 100% funded.  TVARS’ funding ratio has declined over the last several years, while the funding ratios of most of TVA’s competitors have significantly improved.  The main cause of this appears to be TVA’s continued reluctance to properly fund the pension.  For example, TVA budgeted $530 million to cover the pension in fiscal year 2012, but contributed none of those funds to its employees’ pension.  However, TVA did give $8 million to the SERP (supplemental executive retirement plan). All companies in private industry in the United States which have pension plans, including TVA’s major competitors, follow laws established by the Employee Retirement Income Security Act (ERISA) and the Pension Protection Act (PPA).  Under these l...

In order to protect TVARS members in the event the federal government divests TVA, the TVARS board can clarify in the TVARS rules that COLAs are vested benefits . (See support from Dennis To here .) Time is very critical now that TVA is working with President Obama’s administration on a financial review of TVA which includes the option of TVA being divested from the federal government. (See here .) TVARS could be terminated upon divestiture. It is very important that the TVARS board take steps to safe-guard benefits before this occurs. If system termination occurs while TVARS remains significantly underfunded, TVARS may never be able to achieve fully funded status. Not one of the six other TVARS board members would second the motion I made in June 2012 to clarify that COLAs are vested benefits. Once again, I would be glad to forward any e-mails from you to the entire TVARS board. Please e-mail them to me at ljmuzyn@tva.gov .

Within the next couple of months, the TVARS board must vote on a contribution amount to recommend that TVA make in fiscal year 2014. In conjunction with the contribution amount, it is possible the vote will include amendments to the rules. In conjunction with the contribution amount in 2009, the rules were amended to: suspend contribution requirements and related actuarial valuations for four years (Section 9B9); suspend the requirement that part of the contribution go to the “excess COLA account,” which was designed to accumulate and grow funds to be used for payment of future COLAs (Sections 9B9, 10D1 and 10D2); and reduce legitimate accrued pension benefits (Sections 6I, 7L and 18C3). The vote in 2009 was not open to observation, and unless the TVARS board takes action, neither will the vote this year. Not one of the six other TVARS board members would second the motion I made in December to open TVARS meetings to observation. All that is required to open future boa...

The TVARS board is required to recommend a contribution from TVA to be made in fiscal year 2014 prior to the end of the current fiscal year.  (See Section 9B on pages 51-53 of the rules here .)  Since TVA sets its budget months before the end of the fiscal year, it is imperative that this recommended amount be: decided upon by the TVARS board as quickly as possible; sufficient to adequately fund TVARS; and consistent with the amounts charged to ratepayers for pension expense. All seven TVARS board members have an obligation to come together to accomplish this.  (See TVARS board members here .)  I sincerely hope we will be able to accomplish this without further rule changes suspending TVA contributions, or further claims that legitimate accrued benefits are not really vested and must be reduced.  I hope we will be able to put an end to our failure to insure that amounts paid by TVA ratepayers for pension expense are used for their intended purpose. ...

I believe it is critical that the TVARS board specify in the rules that the COLAs are "non-forfeitable" vested benefits as soon as possible BEFORE any divestiture discussions take place.  TVA has communicated for several years now that it believes COLAs are "forfeitable," or not vested.  TVA’s “understanding” could be “baked in” any divestiture discussions if the TVARS board does not act quickly.  I do not know the probability of divestiture occurring, but I believe the TVARS board should protect the members of the system by planning for the worst and hoping for the best. 

From: Muzyn, Leonard J Jr Sent: Friday, April 12, 2013 12:39 PM To: Bays, Leslie P; Hairston, Peyton T Jr; Hoskins, John M; Stokes, Allen E; Troyani, Anthony L Jr; Wilson, Tammy W Cc: Brackett, Patrick D Subject: 2014 TVARS Contribution Fellow TVARS Board Members: From the beginning of 2003* through 2012, TVARS has been substantially underfunded. However, during this ten year period, TVA collected $605,000,000 from ratepayers to cover pension costs that were then diverted to non-pension activities. $522,000,000 of this amount occurred in 2012 alone. These numbers are detailed in a letter from Dan Pitts dated January 20, 2013. (See Dan's letter here .) TVA has twice responded to Dan Pitts' letter and did not, in either instance, take exception to the data in his analysis. (See TVA's responses here and here .) Per TVARS rules, the TVARS board must soon recommend a contribution from TVA to be made in 2014. I believe a very reasonable starting point for di...

The transcript of the December 11, 2012 TVARS board meeting is now available here . The motions I made to open the meetings to the membership, member voting on benefit concessions, and informing TVA of TVARS’ funding requirements, begin on page 9. Please note especially the excellent e-mail from a retiree in support of open meetings which I read on page 11. No one on the TVARS board would second any of these motions. More information is available on my website here .

Many members of TVARS have asked the TVARS board to open its meetings. I agree. I proposed this at the last quarterly board meeting, but it was not approved. See my proposal here . The board’s governance policy does not currently provide for open meetings. See the complete governance policy here . The next quarterly board meeting will be this Friday, March 15, and it will be closed. The board’s governance policy contains a section entitled “Transparency” (Section #5) which begins: “The Rules and Regulations do not require public access to meetings; however, the Board embraces the governance principles of transparency and accountability.” I believe one might reasonably ask: If the board embraces transparency and accountability, why doesn’t the board provide for public access to its meetings in its governance policy? The Rules and Regulations do not require a lot of things that have been implemented in various board policies. The transparency section of the board's gov...

Senator Alexander's office contacted Daniel Pitts to say that Senator Alexander is asking for a response from TVA.  Senator Alexander is asking for a response to the apparent discrepancy between the amounts charged ratepayers and the amounts actually contributed to TVA's pension. Click here to see the letter Daniel Pitts sent to Senator Alexander, Senator Corker, and Congressman Duncan. As of February 8, 2013, Daniel Pitts had not received a response from TVA. Click here to see the letter Daniel Pitts sent to TVA's President and CEO.

TVA employee pension costs charged to ratepayers over the last ten years appear to exceed the amounts TVA chose to contribute to the pension fund by $605 million. The yearly amounts obtained from publicly available information are detailed in a January 20, 2013 letter to TVA’s President and CEO from Daniel Pitts , a TVA Retiree. Pension costs can fluctuate from year to year based on current market conditions and assumptions that TVA and its actuary use to estimate pension costs. Accordingly, there is no expectation that the amount of funds collected and contributed annually will closely correspond. However, over a multi-year period, it would be reasonable to expect that the cumulative amounts would be more closely aligned than the results presented in the letter. The following statement about the pension fund appears on page 6 of the 2012 TVA budget proposal submitted to Congress: “TVA’s proposed budget assumes that annual contributions continue in 2011 and 2012 consistent with ...

The Retirement board has not extended the inclusion of lump-sum payments in lieu of base wage or salary increases in pension and 401K matching calculations for fiscal year 2013 (beginning October 1, 2012).  Prior to this year, they had been extended each year since 1999.  Winning Performance lump-sum payments are included and do not have to be extended each year.   From page 6 of the Rules and Regulations of the TVA Retirement System : *Provided, however, that earnable compensation shall include... lump-sum payments of up to 4 percent of regular salary or wages for Fiscal Years 1999 through 2012 , which TVA informs the System were made available, in lieu of a base wage or salary increase , across a represented or non-represented group of employees as agreed to during annual negotiations, in the case of represented groups, or approved by TVA in connection with an annual review of management and excluded compensation. Provided further, that earnable compensation...

This is my personal blog to facilitate communication among TVA employees, retirees and beneficiaries who are members of TVARS and who wish to preserve their retirement benefits. Please join my site and post your comments.  I have been an elected member of the TVA Retirement System (TVARS, or the system) board of directors since 2003. I am not speaking officially for the TVARS board of directors or TVA management. TVARS is an entity legally independent of TVA. Three of the board members are TVA employees (including myself), three are appointed by TVA management (currently all TVA executive managers), and the seventh is generally a retired TVA employee (appointed by the other six). As TVA employees, we all have a duty of loyalty to carry out directives issued by TVA management in our regular TVA jobs. However, each board member has a fiduciary duty to all the members of the system when performing TVARS duties. This fiduciary duty legally supercedes our duty of loyalty to carry out di...